Three ways to conquer a fear of stocks

Nerves and stumbles were evident last night at the Oscars. (For those who went to bed early: Jennifer Lawrence took a fall on her way to collecting the Academy Award for best actress, and there was the usual bushel of stutters and missteps from presenters and honorees alike.) And would-be retirees who are trying to figure out when, or if, they should jump back into the stock market are probably just as nervous about whether they’re making the right move.

Reuters

Fifty years from now, she’ll need this advice.

Many investors, of course, turned their backs on stocks after markets crashed in late 2008 and early 2009 and, as a result, have missed subsequent rallies. (The S&P 500 jumped 13.4% last year and has more than doubled from its 2009 lows.) Now, money is flowing back into equities – but it’s understandable if you’re anxious about following the herd. Stocks are near all-time highs and Washington is lurching toward yet another budget crisis. Why put your nest egg at risk again?

– Multi-asset funds. Investors might want to sidestep stock funds, including actively managed funds, that are, as Schultz describes it, “exposed to the full blast of market fluctuations.” By contrast, multi-asset funds, which include a mix of stocks and bonds, offer something of a cushion; over time, the two asset classes tend to move in opposite directions. Data from Morningstar show that balanced funds had average total returns of 7.5%, 2.1% and 6.4% over the past three, five and 10 years, respectively, while offering a smoother ride than stock funds experienced.

– Equity-income funds. Here, gains come from both appreciation and dividends – but be sure to look for funds with low expenses and consistently high payouts. Two candidates: Vanguard Dividend Growth
/quotes/zigman/245144VDIGX, which has an active management team that focuses on dividend-paying stocks and companies with a history of increasing yields; and Vanguard Dividend Appreciation
/quotes/zigman/415834VDAIX, an index fund that tracks dividend-paying stocks and has lower expenses.

– A focus on fees. Speaking of expenses, here’s one part of your portfolio where doing your homework pays substantial benefits. No, you can’t control, say, inflation or the market themselves. But you can steer clear of a fund with a 4% annual return that’s charging 2% in annual management fees.

With approaches like these, Schultz concludes, “You still might not be ready to make a move, but you can get an investing plan in place.”

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